A court must impound an insufficiently stamped instrument before determining its admissibility.

The respondents instituted a civil suit seeking declaration and cancellation of a sale deed dated 23.04.2010.

The petitioners, who were defendants in the suit, pleaded that they were bona fide purchasers in possession and sought to rely on a document dated 25.07.2008 to establish the nature, character, and continuity of their possession.

The Trial Court permitted the document to be taken on record but reserved the question of its admissibility.

Subsequently, on the respondents’ objection, the Trial Court held on 04.10.2024 that the document was inadmissible for want of sufficient stamp duty and registration.

Although it observed that an insufficiently stamped instrument was required to be impounded under the Rajasthan Stamp Act, 1998, it did not impound the document.

The petitioners’ subsequent application seeking impounding was dismissed on 14.11.2024 solely on the ground that admissibility had already been decided.

The petitioners challenged both orders under Article 227 of the Constitution.

Whether the Trial Court, after finding the document dated 25.07.2008 to be insufficiently stamped, was statutorily bound to impound it and follow the procedure prescribed under the Rajasthan Stamp Act, 1998?

Whether an unregistered mortgage-related document could be relied upon for the limited collateral purpose of establishing the nature and character of possession, although it could not be used to prove or enforce the mortgage transaction itself?

The Court applied the Rajasthan Stamp Act, 1998, holding that once an instrument is found to be insufficiently stamped, the court has a mandatory statutory duty to impound it and thereafter undertake the prescribed process for determination and recovery of deficient stamp duty and penalty.

The Court relied on Surendra Singh Sankhla v. Smt. Sulochana Gehlot, 2018 (2) DNJ 575, for the proposition that an insufficiently stamped document must be impounded and transmitted for determination of duty and penalty before its admissibility is finally considered.

It further relied on Rahim Bux v. Illahi Bux, AIR 1973 Rajasthan 294, and Fateh Lal v. Civil Judge (J.D.), 2009 WLC 743, for the principle that an unregistered mortgage deed is inadmissible to prove the mortgage transaction but may be considered for a collateral purpose, such as determining the nature and character of possession.

The Court also distinguished the principle that an unregistered mortgage deed cannot be used to prove the mortgage, its terms, or enforcement of rights arising from it.

The Trial Court had itself concluded that the document was insufficiently stamped and recognized the mandatory obligation to impound it.

Having reached that conclusion, it could not refuse to exercise the statutory jurisdiction merely because it had previously ruled on admissibility.

The subsequent dismissal of the impounding application therefore constituted a failure to exercise jurisdiction and a material irregularity warranting interference under Article 227.

The Court further held that the Trial Court had conflated two distinct questions: the document’s inadmissibility for proving or enforcing the mortgage transaction, and its possible use for a collateral purpose.

Since the petitioners relied on the document only to support their pleaded possession and not to establish, redeem, foreclose, or enforce the mortgage, the document could potentially be considered for that limited purpose after compliance with the stamp-law procedure.

The Trial Court was directed to impound the document dated 25.07.2008 and proceed under the Rajasthan Stamp Act, 1998, including determination and recovery of the requisite stamp duty and penalty.

Thereafter, it was directed to reconsider the document’s admissibility in accordance with law, keeping in view that an unregistered mortgage deed may be examined for the limited collateral purpose of determining the nature and character of possession, but not as evidence of the mortgage transaction itself.